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S P O T L I G H T

Andrés Manuel López Obrador’s First One
Hundred Days

What are four of the top issues President-elect Andrés Manuel López Obrador might prioritize in his first one hundred days in office?

President-elect Andrés Manuel López Obrador (AMLO) ran on an anti-establishment platform, tapping into disenchantment with the status quo and a desire for someone who can fix the country’s top problems in steering Mexico on the right course. That message paid off. While the more established parties— Institutional Revolutionary Party (PRI), National Action Party (PAN), and the Party of the Democratic Revolution (PRD)—formed alliances with each other and with smaller parties to increase their appeal, the message of sixty-four-year-old López Obrador is what resonated. He will now take office on December 1st.

In line with his whopping advantage in the polls, election results gave him roughly 54 percent of the vote. Ricardo Anaya (PAN) trailed him with about 23 percent, while José Antonio Meade (PRI) secured about 16 percent.

Mexico is a country full of hope and poised for new prosperity—a reality that does not often make its way into the discourse in the United States. But many deep-rooted challenges remain: the rise in crime, stagnant wages, and corruption among them. The other looming issues: the future of the Mexico-US relationship and the North American Free Trade Agreement (NAFTA) modernization in the midst of US aluminum and steel tariffs. President-elect López Obrador, who campaigned on a promise of change, will now need to deliver on multiple fronts. With five months until he takes office, what can we expect from an AMLO presidency? How will he reconcile demands for increased spending with the need to boost economic growth? And how will he work with President Donald Trump?

Mexico is poised for a new era

of prosperity if deep structural issues are adequately addressed.

In this Spotlight, we ask: What are four of the top issues President-elect López Obrador might prioritize in his first one hundred days in office?

1Focus the economy on national growth and find new leverage points to bring NAFTA talks to a conclusion

NAFTA underpins much of the Mexican economy and with the future of NAFTA under negotiation, Mexico—and all of North America—is in the midst of much uncertainty. AMLO will continue with the negotiations, building off the work of the current Mexican administration, and his economic team has expressed its desire for a win-win agreement. But they, too, leave open the option of walking away. Members of his team have indicated that renegotiation efforts could be abandoned if demands from the US government are unreasonable, stating that they would “rather have no NAFTA than a bad NAFTA.”

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Peru crime and security
Nearly 80 percent of Mexican exports—like these circuit boards—go to the US. [Reuters]

Who will lead Mexico’s negotiations now? AMLO has said he would tap Jesús Seade Kuri, a former deputy director general of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO), to lead Mexico’s negotiation team. In addition to the head negotiator, expect other replacements on the negotiation team.

President-Elect López Obrador also will look to diversify. One of his campaign pledges was to increase the export of Mexican goods to countries other than the Unites States. Currently, almost 80 percent of Mexican exports are destined for the United States. Domestically, López Obrador would implement policies to incorporate into NAFTA’s success the Mexican states that have not benefited from the agreement—particularly those located in southern Mexico.

AMLO built his campaign around a pledge to confront low and stagnant wages. Thus, one of his main policies will be to increase the minimum wage by 15 percent every year. Accurate data on wages in Mexico, however, can be tricky. More than half of workers are engaged in informal labor, which means that there are no administrative records of this work and therefore no official data on the wage dynamics for their labor. According to data provided by the ministry of labor—which include wage information solely on the formal work sector—as of August 2017, less than one percent of Mexican formal workers earn the minimum wage.

Additionally, information on national wages hides several regional variations. While an average worker in Mexico earns around $336 pesos per day (US $17.60), a worker in northern Mexico City earns about 39 percent more, $469 pesos per day (US $24.60). But in the southern state of Oaxaca, a formal worker earns $270 pesos (US $14.20)—far less than the national average.

These huge discrepancies, even given the problems with the data, suggest that measures around increasing the minimum wage might be in order during the first one hundred days. The uncertainty lies in the amount, and that depends on the actual impact any wage increases would have over the whole economy and inflation.

Sustainable growth for Mexico

will entail reducing severe regional disparities.

2Prioritize security by addressing the root causes of crime

Security was the first concern for voters during this election, with a recent poll showing that nearly eight in ten people felt unsafe living in their city. Andrés Manuel López Obrador believes that violence is the result of inequality and proposes to not “face violence with violence, but to instead fight violence with peace." He emphasizes that continuing to exclude people from education and employment opportunities leaves them few other options but to engage in organized crime.

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Alberto Fujimori
At-risk youths in Ciudad Juárez participate in "A Ganar," a program teaching vocational skills to prevent crime. [Reuters]

His solution: address root causes of organized crime including unemployment, family disintegration, and the loss of moral values. The challenge could not be more imminent. The National Council for the Evaluation of Social Development Policy (CONEVAL) says that poverty affects 44 percent of Mexicans while the World Bank states that 2.5 percent of people live in extreme poverty. Meanwhile, 53 percent of youth aged fifteen to twenty-nine remain unemployed. One proposed program: giving these youth, often referred to as ninis, the right to work and study through an initiative AMLO calls Youth Building the Future. It would offer free primary education, workshops, and apprenticeship programs with a stipend of $3,600 pesos per person, per month, as well as increased scholarships for those who want to pursue a university education.

López Obrador also wishes to relaunch the Ministry of Public Safety. On the campaign trail, he frequently criticized President Peña Nieto for passing this responsibility to the secretary of government, and not achieving results. Furthermore, he has indicated that he wants to merge the police, navy, and army into one national guard that will respond directly to him. Something, he argues, that does not require modifying the constitution and will facilitate united decisions to be made to guarantee peace. A controversial proposal whose legality remains unclear.

One proposal that generated controversy during the campaign is his desire to give an “out” to some of those currently involved in the drug trade. What is clear is that he will seek new ways to advance on reducing the drug trade and the infiltration of criminal organizations. Mexicans want new answers; that is why he was elected. The key issue will be to navigate the political pitfalls in moving the ball forward.

Tackling poverty and youth unemployment

will yield the greatest long-term results in combating crime.

3Carve out a US-Mexico relationship based on a new sense of cooperation, if he finds a willing US partner

After a rally in December 2017, Andrés Manuel López Obrador was asked about President Trump’s recent tax cuts and how he will manage the bilateral relationship. His proposal: a focus mainly on strengthening the northeast region of Mexico. That involves lowering the tax rate in the border region to 8 percent, matching the price of gasoline, natural gas, and electricity with that of neighboring US states, and doubling the border area minimum wage with the intention of curbing migration. That response is characteristic of his views. For AMLO in particular, the answer lies in a strong Mexico—a country that focuses first on getting its internal house in order.

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Informal workers in Peru
The US-Mexico relationship has seen rising tensions, but remains indispensable for both countries. [Reuters]

On migration, he has criticized President Trump’s actions against unauthorized migrants as being “repressive, racist and inhumane.” He has vowed to represent the Mexican people and migrant workers from all of Latin America with dignity. President-elect López Obrador has proposed establishing a national immigration institute in Tijuana and using the fifty Mexican consulates in the United States to provide legal services to migrants. Another campaign proposal was to send a team of lawyers, psychologists, and social workers to the border to provide support for children and families.

Regarding President Trump himself, López Obrador stated: "we are going to change things, there is going to be a different relationship, we are going to make sure that it is always a friendly relationship, of cooperation, but not of subordination.” Still, during the second presidential debate, he agreed with President Trump on two things: corruption in Mexico’s government and increasing wages in NAFTA negotiations—a red line for the Peña Nieto administration. López Obrador believes it unfair that American factory workers earn nine times more than their Mexican counterparts.

With border tensions particularly high, the new Mexican president will be tasked with finding a path forward in navigating a working relationship with the United States that serves mutual interests and is based on results rather than rhetoric. Of course, he will need to convince President Trump to embark on that new beginning as well.

AMLO has promised to maintain

the deep cooperation between the US and Mexico, but will expect reciprocity.

4Redirect taxes and investments to benefit the most needy and develop an anti-corruption plan

AMLO’s investment spending will prioritize projects aimed at improving the economic situation of those left behind. He has repeatedly stated that he will cancel what he considers to be superfluous projects, such as the construction of a new Mexico City airport. He does not think a new airport will reduce poverty. However, it is unlikely that this project will be terminated, as it has been more a campaign issue than a policy one.

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Construction workers build the control tower of Mexico City's new airport. [Reuters]

To fund these investment projects, President-Elect López Obrador plans to free new resources from the federal budget, including funds for rooting out corruption (around 500 billion pesos per year) and cutting back on the salaries earned by top administration officials beginning his first day in office. This proposal comes amid the reality that government officials at the federal level have not seen any salary increases—not even to compensate for inflation—since 2002, with wages suffering a more than 90 percent loss of purchasing power. Some action should be expected here, since it had been a huge issue even before the election season and continued to garner attention throughout the campaign. However, it might prove to be more contentious than it appears to be at first glance. Affected workers might take legal action against the measure.

One investment project deemed a priority for the incoming administration is the construction of a “Mayan Train” to be located in the southeast with the objective of providing more infrastructure to states lacking economic development. Another is the proposed construction of a “Transisthmian corridor” that would include a new railroad track and oil refinery located in the area between the Gulf of Mexico and the Pacific Ocean. Keep your eye on what AMLO decides to do regarding the Special Economic Zones (SEZs) in the south. President Peña Nieto established these zones to attract investment in underdeveloped areas by granting companies and investors tax holidays and special customs regimes.

Proposed investment projects aim to improve the socioeconomic situation of the inhabitants of the southern and southeastern regions, where economic development is lagging and has been doing so for decades. However, proposals to increase the level of infrastructure and economic activity in the region come with demands for improvements, particularly in education, for the residents of these regions. Here, with López Obrador pledging to repeal the recent education reform, the question will be what he will do to replace it.

Ambitious infrastructure

and poverty reduction projects will require creative means of freeing up funds.

In Summary

The election of Andrés Manuel López Obrador comes at a pivotal moment for Mexico. With five months until taking office, he will have plenty of time to further develop ideas proposed on the campaign trail into concrete and implementable policies. He will do so with strong backing in Congress and will need to find new ways to effectively collaborate with civil society organizations and the private sector to ensure the longevity of his policies.

Building coalitions and seeking compromise to overcome political polarization deepened by the election will be essential. With pressure from the United States to collaborate on security, bring NAFTA negations to a close, and engage on other pressing regional concerns like Venezuela, López Obrador will have a busy first one hundred days. This is undoubtedly a critical moment for Mexico to consolidate its achievements and carve out its future path.